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3.
Executive Summary
Global Ivy League Next Frontier
Innovation Islands
Back to Business Leap-
the past as usual frogging

4.
12021.: in 9.r: .Er, e;«; 2.41.9; [Hl_lLlL’l. l| . rr r:1rtrr'nrr, r rurv I. ‘-, u,uq34r
turning among
Executive Summary
Imovatron has already trareiormed the financial
services (PS) industry. Fourteen years ago. who
expected the massive growth of e-barlring and
e-brokerage’? Who envisioned the entry of new
players such as retaiers and telecommunications
providers into fmncial services arena thanls to
trreirablitytoharneesthepoweroﬁnnovative
technology? who predicted that technology
would enable outsoucing and offshore
contracthg of core liranclal processes in low-
cost countries such as Inda?
The business environment continues to
change today. and the fmnoial services sector
needs to confront many issues to remain
cornpetitiva. in particular. technology and
innovation are board-level issues: they create
opportunities and pose threats.
Ixumlco cl opponnnllcu
0 to make significant improvements in
operational efficiency by optimizing
processes and operating models
o to obtain better insight Into customer
needs and therefore opportunities to
devise better service packages
0 to explore the potential for customization
and personaization of offerings
0 toensunebroaderacoesstotinancial
services in ema-ging and developing
countries (e. g. mobile banking)
o to ensue broader aooess to pramiun
services
0 to ensue more elfective r‘sk management
(9.9. credit risk. operational risk. caphal
market risk)
Inrmloo at throats:
- Increased competition as the world becomes
an lncreashgly level playirg lleld. New and
stronger competitors emerge, such as non-
traditional players who may enter the FS
arena. specialized players. and hterratioml
companies from emerging countries
0 Oomrnodltization of services and related
price pressures
0 Increasing rlsl<ssa. rol1asonlinelrar. xiand
threats to data security
0 Empowered consumers who exhblt less
brand loyalty
Tho by questions for In cooruico
From the many key drivers tisted in Annex).
project panicpants — in partiouar. leading industry
representatives - identiﬁed two crucbl groups
of questiors. The answers to them wil provide
lnsightintothaluture ottinanclalservioes and
describe how technology and innovation wil
transform both access to and deivery ot ﬁrandal
services by the year 2&0. They are:
c How wit the glaciation of fiurrctd
services ovotvo? will it be turthor
supported by governments and
regulators? What outcomes wil we too
it the next decade?
0 WI innovation be incremental or
Ittrdarnorrtal? will It be driven by
tratilional or new players? lﬁﬂrnttypos
ofhnovatlonwlllwoooo-lorcxanplo.
‘n products and services. diariruion
and sales chmnolc. operations. md
new business models?
Protect panicipants worked from these questions
to develop three very different but pbtsiblo
scenarios 0! the More of ﬁnancial services over
the naxt14years. Thayarera3reeer'¢ed inﬁguret
on globalization and innovation axes.

5.
Figiie 1 Three Scenarios to 2020
Global Ivy League
NCFEPENTN. lltNOVA'll0N
PHMNILY DGWEN EV lllCUP§NT.
GLMN. PS PKMIIN
Global Ivy League explores a world in
which innovation is primarily driven by large
global financial service providers. This results
tn mostly incremental improvements on current
sysnerrs. distrbunon and sales channels and
business modes. These service providers would
evolve into global prooesslng factories with
customized fronH3nds.
In Next Frontier. F5 is a global market but
rnovation s driven mainly by new entrants and
specialized players. As governments pursue
deregulation and take a 'laissez-faire“ approach
to new btsiness models. the ﬁnancial services
sector operates as a modular ecosystem of
highly Soeclalrzed Prwders.
WU W91. QOBAL
Next Frontier
FSMN-'I<ETS
HNDWENW. NNOVATIIN
PRIMRI. Y WNW EV NEW ENTPANTS
ND 9’EClN. lZED PINES
Innovation Islands dillers fundamentally
n that local and regional FS markets diverge as
geopolitical tensions and instability stall
gtobalization. In some countnes. ﬁnancial services
play an important role in the development policies
of governments. Innovation allows these players
to 'leaplrog" ahead of those in other countnes
which have either remained on a ‘business as
usual" track or even regressed “back to the past".
These basic storyines were further developed
by the prqect team and supported by additional
analysis and data. Boxes on selected topics have
been induded within the scenanos. WhtCl"l are
presented in creative formats to further illuminate
some of the key issues that will shape the future
of ﬁnancial services.
-‘-l= v_ ill, ﬁ“.11l" '5"
Alumnus ugulaua ‘

6.
Global Ivy League
Next Frontier
Innovation Islands
Global Ivy League describes a highly concentrated ﬁnancial services
sector dominated by a small number oi large. global players.
Govemments support globalization but take a very conservative
approach to customer protection and regulation of the sector.
At the same time, declining trust in digital media means customers
favour the solidity of traditional ﬁnancial service providers. In this
environment. a small number of financial services institutions
evolve into global powerhouses.
This scenario is written as a business school case study providing
historical analysis of the developments leading to a Global Ivy League.
Next Frontier describes a world in which governments pursue
deregulation and. as the title reflects, technology enables a great
variety oi new business models to emerge. The result is a financial
services industry as an ecosystem ol highly specialized providers,
each locusing on creating a competitive advantage over inwmbents.
There are many new players. including telecommunications
companies, peer-to-peer ﬁnancial services providers, processing
providers. retailers and lntemet companies.
This scenario is written as a series of blog entries in 2021 in which
an expert on ﬁnancial services reflects on how technology has
revolutionized the sector since 2007.
Innovation Islands describes a world in which globalization stalls
due to geopolrucal tensions and global instability. Government
policies toward the ﬁnancial services sector diller widely among
countries. Three trend, -. become apparent:
- “Leaplrogging": in large emerging economies such as China and
indie. government regulation and investment in lnlraslmcture
fosters the local l'-nanclal service industry, expanding access
to the poor and leading to new business models that “lcapfm<_1"
over developed markets in area such as mobile banking and
ﬂexible, low-cost operating models.
- “Business as usual”: in other mainly developed economies such
as the US or European countries where innovation neither
accelerates nor decelerates. There is only limited change to
business models.
- “Back to the past": in the remaining countries and regions, mainly
in developing economies. Governments increase control over
the ﬁnancial services sector but do not foster local innovation:
as a result. there is little progress and sometimes even regression
in the efficiency and quality ol PS.
This scenario Ls written as a series of gpgedms given at the Indian
Institute of Technology on the occasion of the 10"‘ Annual Financial
services Innovation Awards ceremony.

7.
2007-2010: Social and technological changes make the
true power ot SOCIal networks apparent, and Deento-peer
ratings start to replace urands Forward-looktng
gcmerrtments encourage openness and market competition.
Consumers deve'/ op trust lﬁ digllill security. The emerging
tech-savvy generauon demands dtoice and a high degree
of D-ersonaltzattrsn and customization of ﬁnancial oroducls
and services Innovative technologies enable the emergence
of modular ooerat-ng models
201 1-2015: Common standards for technology become the
norm. and the ﬂow of financial transactions among
consumers, retailers and banks becomes lncttortbess with
increased global regulatory collaboration and alvgnrnent
Advances lﬂ ldeﬂtilﬁlatlﬂni authentication. credit rattng and
sesurtty erode the position of traditional banks‘ Peer—to—peer
lending becomes -ncreasrngty popular as a rB6ult.
20072010"; . 1 ~
. .7. r 7.. i‘: y.
2016-2020: High tavels of trust develop among lndividtﬁ
and communities across countries and cultures;
Gwamments maintain an opm atﬁnda to new budma
models and support the 'ndustry‘s salﬂragtlatian efforts.
Consumers are empowered by “Intelligent Agent’ software
that helps mam uctenutyprouuctsandsevwoestiumagtaat
vanery or providers.
-- r «I 4lh4"‘h
Atatutuns anurtoatq

10.
gift" [‘llli"ll l‘ , trawl (tint: -il_u
mo-uluslndohmntnnnottnrna-ounmnmm-V ‘ w
2. Lending operating models In ﬁnancial services and supporting technology
Deﬁnition of an operating model
An operating model is a summary of how the business operates. It presents a holstic view of the
key business components. Business component is a view on a selected section of an enterprise
that includes resources. people. technology and the know-how necessary to d6|N&l' value. The
model pictured below 6 an outﬁne oi an ﬂlustrative operating model for a bank. Speciﬁc operating
models could be deﬁned for each sector within the financial services industry such as retail
banking, wholesale banking. asset management, insurance. investment banking and trading.
. . .7 2 3 Business Operating Model Outilno for a ﬁnancial Service Pmvldor
Llllstrhlon ostrategy olllantetlnu
-arammgt -salesasennoe
-CtmnetsMgt -ostntnermanauemem
s| jkj1g
'3rdPdty| tIs¢Ellol'I
0Fraul/ Arnmoneyuundarlrlg
oktvlstlrysorvloss
1. Qismmmgn - business components related to managing the access to market: rnarkeung.
branding and sales of products as wall as sales channel management
2. Qmmmmum — business components related to managng customer base and product portfolo
3. Mar1uja<; mr1_g - business components rented to transaction processing for all products sold
by the bank. e. g.. lending, payments and deposit management
4. Emarnuaﬁjmgtgzgg — support tunctiors such as human resources. risk. compiance and finance

15.
W RLD
EC NOMIC
F RUM
COMMITTED TO
IMPROVING THE STATE
OF THE WORLD
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international organization committed to improving
the state of the worid by engaging leaders in
partnerships to shape global, regional and
industry agendas.
incorporated as a foundation in 1971. and based
in Geneva. Switzerland, the World Economic
Forum is impartial and not-for-proﬁt; it is tied to
no political. partisan or national interests.
(www. weforum. org)